Apple, betrayed by its own law firm

Lawyer-turned-"troll" started planning patent suit six days after iPhone launch.

When a company called FlatWorld Interactives LLC filed suit against Apple just over a year ago, it looked like a typical "patent troll" lawsuit against a tech company, brought by someone who no longer had much of a business beyond lawsuits.

Court documents unsealed this week reveal who's behind FlatWorld, and it's anything but typical. FlatWorld is partly owned by the named inventor on the patents, a Philadelphia design professor named Slavko Milekic. But 35 percent of the company has been quietly controlled by an attorney at one of Apple's own go-to law firms, Morgan, Lewis & Bockius. E-mail logs show that the attorney, John McAleese, worked together with his wife and began planning a wide-ranging patent attack against Apple's touch-screen products in January 2007—just days after the iPhone was revealed to the world.

Jennifer McAleese reached out to numerous "troll patent" companies, as she called them, convinced that she and Milekic had an "excellent position against Apple" if and when they chose to sue. She e-mailed top patent lawyers at Google and Nokia, competitors known to be in patent clashes with Apple.

The whole time she was advised by her husband, a lawyer who had access to reams of confidential Apple data—but who says he never touched it. (Apple doesn't see it that way.) Together, the McAleeses created "an indirect and covert pipeline" of information pumped to FlatWorld's attorneys according to Apple lawyers. Now Apple wants FlatWorld's law firm, Seattle-based Hagens Berman Sobol Shapiro, kicked off the case.

Meanwhile, the pressure has surely started to mount at Morgan Lewis, which has been a key firm handling sensitive patent matters for Apple since 2003. The venerable firm has reaped huge rewards from assisting more than half the Fortune 100; partners at the 1,300-lawyer firm make around $1.5 million in profit each year.

It's an exclusive club and one where John McAleese is apparently no longer welcome. He appears to have been ousted, thrown into a BigLaw "memory hole." McAleese's bio page was deleted late Thursday, and his direct phone line now goes straight to an automated answer: "John McAleese is no longer with Morgan Lewis and Bockius," says a deadpan female voice.

"Yeah, unfortunately, I can't comment," said Jennifer McAleese, reached by Ars on Friday. "I'm sorry." As for her husband, an environmental law litigator who didn't specialize in patents, "he can't comment either."

Dissecting a lawyer's computer: “Do you know what this is about?”

FlatWorld Interactives sued Apple in April 2012, naming just about every gadget in Apple's arsenal as a product that infringed its two relatedpatents. FlatWorld's patents are said to cover swiping gestures on a touch screen. During the next three months, the company filed similar lawsuits against LG Electronics and Samsung aimed at a wide array of smartphones made by those companies.

But Apple apparently didn't know about John McAleese until February. That's when opposing lawyers sent Apple a "privilege log," a kind of spreadsheet explaining why certain documents are not going to be handed over during the discovery phase of litigation. FlatWorld listed all the e-mails between the company's founder and the various lawyers he communicated with about possibly filing suit together. There have been many and one of the lawyers listed was McAleese. In fact, that name showed up more than any other lawyer. Even more eye-opening was his identification in a "key" to the privilege log: "Attorney at Morgan Lewis & Bockius LLP."

This got the attention of an Apple in-house lawyer, Jeff Risher, who rang the first alarm bell in Cupertino. On February 25, Risher fired off an e-mail to a Morgan Lewis partner named Scott Garner. That e-mail is redacted in the public court record, but Risher couldn't have been happy. Garner forwarded the whole thing to his McAleese at 12:48am, asking "Do you know what this is about?"

"Yes, I do," McAleese responded the next morning. His wife started FlatWorld in 2007 "and we (my wife and I) contributed capital in connection with the start-up," he explained. McAleese told Morgan Lewis' general counsel at the time about the lawsuit. "I am happy to talk to you about this at your convenience," concluded McAleese, seemingly with a no-big-deal tone.

McAleese's involvement has become a very big deal, though, and it could get bigger. Apple fired off subpoenas to Morgan Lewis, and the firm—likely desperate to save its relationship with a premier client—worked quickly to get the evidence Apple wanted. Morgan Lewis handed over McAleese's relevant e-mails and files. When Apple had questions about metadata in a letter signed by Jennifer McAleese, Morgan Lewis gave Apple the confirmation it needed. (That letter, seeking to license a patent to someone named "Michael," had been edited by John McAleese, user MCAL5094.)

That's when Apple started its all-out effort to argue that McAleese's connection to Morgan Lewis should halt the FlatWorld case, at least until FlatWorld gets new lawyers. By early May, Apple assembled a motion with hundreds of pages of evidence, highlighted slides of key portions, and declarations from key Apple employees—including Risher, who interrupted some Hawaiian travel to sign a declaration on May 7. The motion and associated exhibits were unsealed earlier this week.

But the documents in the public record thus far may just be the tip of the iceberg, and big questions remain. Why didn't Morgan Lewis—which knew the lawsuit was coming before it was filed—see an ethical problem in letting one of its partners invest in a patent troll, especially one specially designed to target one of the firm's big clients? And how many other big-firm lawyers are entwined with "start-ups" that are actually holding companies, created to attack the very corporations they are supposed to be defending?

Six days after iPhone's launch, planning for a patent attack

FlatWorld Interactives formed in August 2006. While Jennifer McAleese and inventor Milekic gave marketing their products a shot, e-mail logs show there was a patent infringement backup plan on their minds from the beginning.

Seeing Steve Jobs get up on stage and show off the "magical" iPhone touchscreen must have made plan B look even better. On January 15, 2007—just six days after the iPhone was revealed—the McAleeses and their lawyer were exchanging e-mails about "potential infringement" and "potential litigation," according to the privilege logs.

After seeing the iPhone, the McAleeses worked with Milekic to file a follow-up patent application in mid-2007. The goal of that "reissue" application, Jennifer McAleese later stated, was to "tailor it more closely to iPhone claims."

At the same time that McAleese was fine-tuning her company's patent, she and Milekic were trying to get into the touchscreen software business. In 2008, they built three large touchscreen displays for the Philadelphia Flower Show—although two of them ended up breaking down. "Any information displayed is touchable, movable, grab-able," Milekic told a reporter from the Philadelphia Business Journal at the time.

The following year, FlatWorld got its second deal—and what appears to be its last—doing a large touchscreen installation for the Philadelphia Zoo. Milekic had never written a line of code or taken a programming class. He told a Philly tech publication that his touchscreen software was built with a program called RunTime Revolution, which says it "makes programming learnable by anyone who can use a computer."

“Since [Milekic] is a psychologist, he really designs for children,” McAleese said in the 2009 interview. “There’s no directions or instruction, people just know what to do because it’s simple and intuitive.”

As intuitive as it might have been, the company only finalized two deals in two and a half years. It never launched ShowMe Tools, a program it said was 80 percent done in 2008. So McAleese and Milekic doubled down on that potentially more lucrative project: who would help them sue Apple?